Paying for It

By Kellie Lunney

May 19, 2011

Barely a day goes by that a new proposal doesn't emerge targeting federal pay and benefits as a way to reduce the deficit. In fact, it is becoming increasingly difficult to keep track of them, though both supporters and opponents remain helpfully vocal on the subject.

"I believe that these proposals do two things: deliberately make the federal employee a scapegoat for federal debt and deficit spending, and [they're] designed to demoralize that workforce," said Rep. Gerry Connolly, D-Va., during a Wednesday conference call with reporters, union representatives and a longtime federal employee.

Connolly said he believes it's fair to "put everything on the table," but that the current political climate undermines honest dialogue and negotiation. "We have reason not to trust [Republicans'] motivation to look for savings," Connolly said.

But is trust the issue? Or is it really about fundamental, philosophical differences related to the size of government and the fact that, among the myriad sacred cows both parties fiercely protect, cutting federal pay and benefits offers a path of least resistance?

The Obama administration reportedly is open to the idea of requiring federal employees to contribute more to their retirement plans, though not necessarily at the same rate or pace as GOP proposals envision. The president was the driving force behind the two-year federal pay freeze, though he takes pains to emphasize at every opportunity what a difficult decision that was for him to make.

So far, the two-year pay freeze on federal civilian salaries is the only significant recommendation that has become reality. The others are just proposals at this stage. As Connolly put it, "It's way too early to say what's viable or not." Here's a noncomprehensive list of ideas related to federal pay and benefits being kicked around by elected officials hoping to whittle down the deficit:

Longer pay freeze: The House 2012 budget resolution, now under consideration in the Senate, calls for a federal pay freeze through 2015. The bipartisan deficit commission, led by Alan Simpson and Erskine Bowles, recommended a three-year civilian pay freeze across government. Those proposals are mild compared with a House bill, now in subcommittee, that would impose a five-year pay freeze.

Hiring freeze or slowdown: Several proposals floating around aim to directly reduce the size of the federal workforce. The House budget resolution includes a provision that would permit the government to hire only one new employee for every three workers who retire. The Simpson-Bowles deficit commission recommended reducing the government workforce by 10 percent, or 200,000 employees, by hiring two workers for every three who leave their jobs.

Increased health care contributions: Another recommendation from the Simpson-Bowles report would increase the amount of money federal employees pay in premiums under the Federal Employees Health Benefits Program.

Increasing employee contributions to retirement: One of the proposals gaining traction is a recommendation included in the House fiscal 2012 budget resolution that would require federal employees to pay for half the defined benefit they receive with their pensions at retirement, an increase from the current contribution of 0.8 percent of payroll. Unions have argued that this would essentially amount to a 5 percent pay cut. Another idea would base benefits for new retirees under the Civil Service Retirement System and the Federal Employees Retirement System on the highest five years of earnings, rather than the highest three years.

Cost-of-living adjustment deferment: The deficit commission also urges decisionmakers to consider deferring COLAs for retirees until age 62.